Managers outsourcing in wake of Madoff scandal
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Managers outsourcing in wake of Madoff scandal
By Danielle Levy | 09:27:37 | 10 February 2009
The Madoff scandal is prompting wealth managers and advisers alike to put in place new arrangements to outsource the selection of hedge funds and avoid regulatory risk.
Hedge fund consultancies such as Allenbridge HedgeInfo have reported a pick-up in business.
The group has said that at least one unnamed global private bank has handed it control of the due diligence process on hedge funds in the wake of the scandal.
Christopher Miller (above), chief executive of Allenbridge HedgeInfo, is expecting other discretionary wealth managers, family offices and wealth advisers to follow suit.
James Higgins, wealth adviser for Chamberlain de Broe, also expects the outsourcing of due diligence and hedge fund research to continue. He said: ‘Now there is a need to demonstrate that you have really looked at this sort of thing, so there is a growing market for specialist businesses with high-quality information.’
Higgins expects intermediaries – who do not necessarily have the in-house research or legal capabilities – to use external consultants more, under pressure from the FSA’s focus on treating customers fairly (TCF).
He said: ‘You need someone who can specialise on the investigation side, who has interviewed the fund manager, looked at the risk controls and interviewed the risk control manager.’
Chamberlain de Broe currently has about £14 million allocated towards hedge funds and funds of hedge funds and uses the Guinness family office, Iveagh, to carry out the necessary due diligence.
Albourne Partners, which provides consultancy for hedge fund investors, has also received increased enquiries.
Adrian Sales, head of due diligence at Albourne, said demand for the firm’s due diligence service has come from compliance and investment teams at various investment managers.
Sales said: ‘This is an ongoing process, as stakeholders are generally looking to check and double check due diligence done by investment teams.’
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